What is the Job Support Scheme?

On 22 October 2020, the Chancellor announced further changes to the Job Support Scheme by expanding it into two schemes, Job Support Scheme (Open) for use by business that can continue to trade and Job Support Scheme (Closed) for those that are legally obliged to cease trading under Tier 3 rules.

Which employers can use the JSS (Open)?

Employers of any size with a UK bank account and UK PAYE schemes will be able to use the JSS (Open) but large businesses (those with 250 or more employees) will have to meet a financial assessment test to show that their turnover has stayed level or is lower now than before experiencing difficulties from Covid-19. The Government expects that large businesses using the JSS will not be making capital distributions, eg dividend payments or share buybacks, whilst accessing the JSS grant.

As with the Job Retention Scheme, organisations who are fully publicly funded are not expected to use the JSS (Open). Those who are partially publicly funded are eligible where their private revenue has been disrupted.

The Scheme is open to employers who have not previously used the Job Retention Scheme to furlough employees, as well as those who have. An employee being placed into the JSS does not need to have been furloughed before.

The Chancellor has confirmed that employers using the JSS (Open) can still claim the Job Retention Bonus, which will provide employers with £1000 for each furloughed employee they continue to employ until the end of January 2021 who also meets other criteria.

What is the large employer financial assessment test?

Large employers (250 employees or more) have to demonstrate their turnover has remained equal or fallen to show they have been adversely affected due to coronavirus.

Large employers who are VAT registered and submit quarterly VAT returns should compare the total sales figure on their VAT return, which is due to be filed and paid between 31 August 2020 and 7 November 2020, with the total sales figure from the same quarter in 2019. This is the figure recorded in box 6 of their VAT return, which captures the total value of sales and all other outputs excluding any VAT. This box captures all sales, whether subject to VAT or not.

Large employers who submit monthly VAT returns should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019.

Large employers who file less frequently should compare the three consecutive months which are due to be filed and paid by 7 November 2020 with the same period in 2019 but will need to have submitted a VAT return between 31 August 2020 and 7 November 2020 to be eligible.

Large employers who are part of a VAT group will use the turnover figures for the VAT group for this calculation.

Any charity with 250 or more employees that is registered with a UK charity regulator or are exempt from such registration will not be required to carry out the test and are eligible for this scheme.

Further guidance for large employers who are not VAT registered will be available by the end of October.

In addition, the government encourages large employers to reflect on their responsibilities when claiming the grant – it is not expected that they, and their corporate groups using the scheme, will not make capital distributions whilst claiming the Job Support Scheme grant.

This includes:

• dividend
• charge
• free or other distribution
• any equivalent payment that a partnership may make to its partners.

HMRC intend to publish the names of employers who have used the scheme.

Which employees can be placed on the JSS (Open)?

An employee to be entered into the JSS (Open) must be on an employer’s PAYE payroll between 6 April 2019 and 23:59 on 23 September 2020 which means that a Real Time Information (RTI) submission notifying payment to the employee to HMRC must have been made at some point from 6 April 2019 up to 23:59 on 23 September 2020.

Employers can only claim for employees that were in their employment on 23 September 2020. If employees ceased employment after 23 of September 2020 and were subsequently rehired, then employers can claim for them.

The Scheme is intended to protect “viable” jobs in businesses which are facing lower demand over the winter months due to Covid-19. The JSS (Open) will only support those who are working fewer hours than normal; not those who are working no hours.

A key criterion to gaining access to the JSS (Open) is a minimum level of working hours: employees must work for at least one fifth (20%) of their normal working hours.

Do I need to have used furlough before to use the JSS (Open)?

No. You can use the JSS (Open) even if you have never used the Job Retention Scheme to furlough employees before. If you have furloughed employees before, you are not limited to using the JSS (Open) for only the employees who have been furloughed before. You can use the JSS (Open) for an employee who has never been furloughed before.

Do I need to agree use the JSS (Open) with employees?

Yes. Reduced hours working arrangements will need to be agreed with employees (or unions) and notified to them in writing. The agreement must cover at least seven consecutive days. HMRC may ask for sight of the agreement. On 22 October, the Chancellor changed the structure of the scheme, including the minimum working hours threshold and the payment arrangements. If you have already agreed use of the JSS (Open) under the original payment arrangements and still wish to use the scheme, you will need to revisit the agreement to ensure that it complies with the revised payment arrangements. This is important because the employee’s wage outcome will be different.

Employers must maintain records relating to the terms of the temporary working agreements for each employee including how many hours employees work and the number of usual hours they are not working for. The written record of agreement must be kept for 5 years.

I can provide you with a draft letter if required.

What are the wage arrangements for an employee on the (JSS (Open)?

An employee’s wages, when on the JSS (Open), will be funded partly by the employer and partly by the Government.

Employers need to pay employees for the hours they work, which must be at least one fifth (20%) of their normal working hours. The employer must also pay the employee’s wages for 5% of the ‘unworked hours’ ie the hours the employee would normally work, but is not working, to a maximum of £125 per month.

The Government will provide a grant to cover 61.67% of pay for the unworked hours up to a maximum cap of £1,541.75 per month. This means that all employees on the JSS (Open) will continue to earn at least 73% of their normal wages, where the contribution has not been capped.

The JSS (Open) will not cover employer National Insurance contributions or pension contributions for the elements of pay the employer is responsible for; employers will remain liable for these.

Employers can pay employees more if they wish but this is not a requirement.

Employees are entitled to the National Living Wage, National Minimum Wage or Apprentices Minimum Wage for the hours they are working or treated as working (such as training undertaken at the request of the employer in non-working hours) under minimum wage rules. At least minimum wage rates must be paid for all hours worked or treated as worked.

Eligible employers will be able to claim the JSS Open grant for employees who are working at least 20% of their usual hours. Employees can do training in working hours while being claimed for under the Job Support Scheme. Hours that employees spend training are paid for by the employer at their full rate of pay and will count towards 20% of their usual hours.

Example

An employee normally works five days a week and earns £1,400 per month. Under the JSS (Open), they work 20% of normal working hours . The percentage of hours lost is 80% (worth £1,120). The employer pays £280 for hours worked, and a further £59 (5% of the unworked hours). The Government will pay £691 (61.67% of the unworked hours). The employee receives £1,027 in total per month.

The employer will also pay NICS and auto enrolment pension contributions on their payments.

How do I calculate the employee’s reference salary?

To enable you to calculate how much to claim from the JSS (Open), you will need to ascertain what an employee’s reference salary this. Separate methodology is applied depending on whether the employee works fixed or variable hours.

Fixed hours

For employees who are paid a fixed salary, the reference salary is the greater of:

• the wages payable to the employee in the last pay period ending on or before 23 September 2020
• the wages payable to the employee in the last pay period ending on or before 19 March 2020. This may be the same salary calculated under the CJRS scheme.

Variable hours

For employees whose pay is variable the reference salary is the greater of:

• the wages earned in the same calendar period in the tax year 2019 to 2020
• the average wages payable in the tax year 2019 to 2020
• the average wages payable from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

The amount an employer should use for calculating an employees’ reference salary is made up of the regular payments they are obliged to make, including:

• regular wages
• non-discretionary payments for hours worked, including overtime
• non-discretionary fees
• non-discretionary commission payments
• piece rate payments.

Calculations cannot include:

• payments made at the discretion of the employer or a client, where the employer was under no contractual obligation to pay, including:
  • any tips, including those distributed through troncs
  • discretionary bonuses
  • discretionary commission payments
• non-cash payments
• non-monetary benefits like benefits in kind (such as a company car) and salary sacrifice schemes (including pension contributions) that reduce an employees’ taxable pay.

How do I calculate what an employee’s usual hours are?

Again, this calculation will depend on whether an employee works fixed or variable hours.

Fixed hours

For employees contracted for a fixed number of hours and whose pay does not vary according to the number of hours they work, usual hours are calculated based upon the greater of:

• the hours that the employee was contracted for at the end of the last full pay period ending on or before 23 September 2020
• the hours that the employee was contracted for at the end of the last full pay period ending on or before 19 March 2020, this may be the same number of hours calculated under the Coronavirus Job Retention scheme (NB. if employees moved to part time working, this may be varied and full details will be included in forthcoming Guidance).

This should include hours paid as annual leave and statutory leave.

Variable hours

The variable hours calculation applies if either:

• the employee is not contracted to a fixed number of hours
• the employee’s pay depends on the number of hours they work

For employees whose number of hours varies and/or whose pay depends on the number of hours they work, the number of usual hours is calculated based on the higher of:

• the number of hours worked in the same calendar period in the tax year 2019 to 2020
• the average number of hours worked in the tax year 2019 to 2020
• the average number of hours worked from 1 February 2020 (or the employee’s start date if later) until 23 September 2020

This should include hours paid as annual leave and statutory leave.

The calculation of usual hours is not and cannot be altered if the employee is expecting to work more or fewer hours than this in the future.

For employees who are part of a flexible work time arrangement, employers should:

• not count as hours worked any hours that the employee worked but was not paid for because they accrued paid time off which they could take later
• count as hours worked any hours that the employee took as paid time off (‘flexi-leave’), which they had accrued by working additional hours at some other time

For employees who are paid per task or per piece of work done whose hours cannot be calculated in this way, hours can be estimated based on the number of ‘pieces’ produced and the average rate of work per hour, as per National Minimum Wage rules.

Full rules will be covered in guidance published by the Government at the end of October.

Once the employee is in the JSS, do they have to stay in it?

No. Government guidance confirms that employees can cycle on and off the scheme. There is also no requirement for the employee, once in the JSS (Open), to work the same number of hours each month (provided any changes do not fall below the minimum working hours requirement).

However, each reduced hours working arrangement must last for at least seven days.

Can I give an employee a redundancy notice while I am claiming from the JSS (Open) for them?

No. Employers cannot claim for an employee who has been made redundant or is serving a contractual or statutory notice period during the claim period.

How will I receive the funds?

Guidance confirms that JSS (Open) grants will be paid in arrears to reimburse the employer for the Government’s contribution. You must have paid the full amount claimed for an employee’s wages to the employee before each claim is made. You should also pay the associated employee tax and employee and employer National Insurance contributions to HMRC, even if your company is in administration.

Claims can only be submitted in respect of a wage costs actually incurred in given pay period. Payment must have been reported to HMRC via an RTI submission.

Claims can be made online from 8 December 2020 and reimbursement will be made on a monthly basis.

Which employers can use the Job Support Scheme (Closed)?

As the JSS (Open) includes a minimum working hours threshold, it cannot be used by any employer which has fewer working hours to offer, or those who cannot offer any work.

The Chancellor confirmed that the JSS will be expanded to offer wage assistance to those businesses which are required, under lockdown procedures, to temporarily close their business. The hospitality sector (pubs, bars, restaurants) will be the most heavily affected sector, but closures have also affected, amongst other businesses, casinos and betting shops. Some businesses, for example, nightclubs, have been under enforced closure since March 2020.

The expansion will offer assistance to businesses which cannot offer any work to their employees but, from November 2020, are unable to use the Job Retention Scheme because of its closure and are also unable to use the JSS (Open) due to their inability to meet the minimum working hours threshold because of the enforced closure.

Businesses which are not legally required to close will not be able to use the JSS (Closed); they will need to use the JSS (Open) which requires a minimum of one fifth of working hours to be performed. If none of these apply i.e. there is no enforced closure but the employer is not able to provide at least 20% of working hours to employees, other measures such as redundancy or unpaid leave may need to be considered.

‘Closure’ includes businesses whose premises are restricted to delivery or collection only services.

Any business legally required to close due to lockdown before the end of October 2020 can still use the Job Retention Scheme to either fully furlough or flexibly furlough employees, subject to its qualifying criteria.

Businesses who are required to close as a result of specific workplace outbreaks by local public health authorities are not eligible for the scheme.

Employers must:

• be enrolled for PAYE online
• have a UK, Channel Island or Isle of Man bank account.

There is no large employer financial impact test for the JSS (Closed).

HMRC intend to publish the names of employers who have used the scheme.

Do I need to have used furlough before to use the JSS (Closed)?

No. You can use the JSS (Closed) even if you have never used the Job Retention Scheme to furlough employees before. If you have furloughed employees before, you are not limited to using the JSS (Closed) for only the employees who have been furloughed before. You can use the JSS (Closed) for an employee who has never been furloughed before.

Which employees can be placed on the JSS (Closed)?

Eligible employers will be able to claim the JSS Closed grant for employees:

• whose primary work place is at the premises that have been legally required to close as a direct result of coronavirus restrictions set by one or more of the four governments of the UK
• that the employer has instructed to and who cease work for a minimum period of at least 7 consecutive calendar days

Further eligibility guidance will be published before the end of October.

An employee to be entered into the JSS (Closed) must be on an employer’s PAYE payroll between 6 April 2019 and 23:59 on 23 September 2020 which means that a Real Time Information (RTI) submission notifying payment to the employee to HMRC must have been made at some point from 6 April 2019 up to 23:59 on 23 September 2020.

Employers can only claim for employees that were in their employment on 23 September 2020. If employees ceased employment after 23 of September 2020 and were subsequently rehired, then employers can claim for them.

Employees can be on any type of contract, including zero hours or temporary contracts. Agency workers are regarded as employees of an employment agency for the purposes of this scheme, provided they are employees for Income Tax purposes.

They do not need to have been furloughed before to be placed into the JSS (Closed).

Do I need to agree use the JSS (Closed) with employees?

Yes. Changes to working hours and pay will need to be agreed with employees (or unions) and notified to them in writing. HMRC may ask for sight of the agreement. Employees must be instructed to cease all work for a minimum of 7 consecutive calendar days. On 22 October, the Chancellor amended the payment arrangements connected with the scheme and reduced the maximum monthly wage grant from £2,100 per month to £2,083.33 per month. If you have already agreed use of the JSS (Closed) with employee under the original payment arrangements and still wish to use the scheme, you will need to revisit the agreement to ensure that it complies with the revised payment arrangements. This is important because the employee’s wage outcome will be different.

Employers must maintain records relating to the terms of the temporary working agreements for each employee. The written record of agreement must be kept for 5 years.

What are the wage arrangements for an employee on the JSS (Closed)?

An employee’s wages, when on the JSS (Closed), will be funded by the Government.

The Government will provide a grant to cover two thirds (or 67%) of pay up to a maximum cap of £2,083.33. per month. The cap was originally announced as £2,100 per month but the adjustment was confirmed on 22 October.

Determining what an employee’s normal wages/hours are will be done in a similar way to that required under the Job Retention Scheme but the Government are yet to provide further details, unlike for the JSS (Open) where some details, though not all, have been confirmed.

Please contact me if you have any specific queries.